S&P 500 Market Analysis 12/18/09

The SPY gapped down through the 111.00 level and then closed below the 110.20-110.50 level which has been acting as the mid point support/resistance in this range of the last 6 weeks. It now appears that a test of the lower end of the range at 109 is likely as the important financial sector (XLF) broke important support at 14.20 on Thursday, it is difficult to imagine a recovery of SPY without support from financials. Friday is options expiration day and while it has typically meant smaller ranges, it seems like we should be prepared for a more volatile environment.